Calculating WACC Brown Industries has a debt-equity ratio of 1.5. Its WACC is 9.6 percent, and its costof debt is 5.7 percent. There is no corporate tax.a. What is the company's cost of equity capital?b. What would the cost of equity be if the debt-equity ratio were 2.0? What if it were .5? What if it werezero?

The debt-equity ratio refers to the ratio which evaluates the company's position in terms of its…

Answered: Brown Industries has a det percent.…

Brown Industries has a det percent. There is no corporate tax. e company's cost of equity capital ld the cost of equity be if the deht.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Calculating WACC Brown Industries has a debt-equity ratio of 1.5. Its WACC is 9.6 percent, and its cost
of debt is 5.7 percent. There is no corporate tax.
a. What is the company's cost of equity capital?
b. What would the cost of equity be if the debt-equity ratio were 2.0? What if it were .5? What if it were
zero?

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